The courier, express, and postal industry is the largest segment of the transportation marketplace worldwide. This blog will provide a personal perspective on the challenges faced by firms in the industry as they serve an increasingly competitive market.

Wednesday, October 21, 2009

FedEx Ground has now received a new challenge to its practice of using contractors to delivery parcels at FedEx Ground. The challenge comes from a threat by the the attorney generals of New York, New Jersey and Montana to sue FedEx Ground for violation of state employment laws by classifying its delivery drivers as contractors and not employees. FedEx Ground has until October 27th to respond and explain why no suit should be filed. A similar letter was sent to FedEx Ground by eight attorney generals in June including New Jersey and Montana which are part of this effort. (New York's attorney general was not a signatory to the earlier letter.)

The attorney generals contend that "the level of control FedEx Ground exercises over its drivers merits, under New York, Montana and New Jersey state law, employee status and the protections inherent in that status. FedEx Ground strictly controls all aspects of the work of drivers doing pick-up and delivery. Hours are prescribed by FedEx Ground with drivers having almost no discretion as to the hours they work. Workers’ performance of their tasks - from the loading of their trucks to their hand-off to customers - is directed and supervised by FedEx Ground. Drivers’ uniforms are mandated by FedEx Ground, even down to the colors of drivers’ socks, and drivers’ opportunities to engage in non-FedEx Ground related work are also almost entirely constrained by FedEx Ground rules. Drivers are only allowed to use their own trucks for non-FedEx Ground purposes if the trucks are used outside of FedEx Ground working hours. Additionally, the work of FedEx Ground drivers is at the very core of FedEx Ground’s business activities; drivers are completely integrated into the overall business functions of the company."

The above quote comes from the letter that the appropriate state offices for enforcing labor law violations sent to FedEx Ground.

Not surprising, the Teamsters applauded the actions of the three state law enforcement officials. The Teamsters have long been active in efforts to force FedEx Ground to end its use of contractors for delivery. They have a website promoting changes in the legal framework within which FedEx works at its Express and Ground divisions with a goal of making it easier to organize everyone that works for FedEx or its contractors.

The actions of the the attorney generals are likely to be opposed by the Express Carrier Association and the Messenger Courier Association of America. Both of these organizations represent local and regional parcel firms that heavily use the contractor model in their delivery services. Members of these associations could become collateral damage in the conflict between the attorney generals, the Teamsters and FedEx Ground.

FedEx Ground has had mixed success in defending its contractor model. It settled a suit in California that required it to switch from single-driver contractors to multiple driver contractors. It has received a number of unfavorable employment law rulings at the state level. NLRB has issued unfavorable rulings that were overturned in court. FedEx Ground successfully defended IRS suits.

Given the politics of the issue, FedEx Ground will likely face some legal action in New York, New Jersey, and Montana even with a vigorous defense in the next week. Given the pace at which these and similar cases proceed, industry stakeholders can expect that the issue will continue to garner headlines for many years to come.

The labor issues will not affect FedEx Ground service as the delivery personnel themselves are rarely parties to the disputes between labor law officials and FedEx Ground. Shippers will want to stay informed about the process of the latest challenge to FedEx Ground's contracting model as it could affect long run competitive structure of the parcel delivery industry.

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Blog Author

Alan Robinson is the President of the Direct Communications Group and an associate of Analytic Business Services (AnaBus). He has over twenty years experience helping firms and government officials deal with the regulatory, policy, marketing, and management issues associated with changes in competition within transportation, parcel delivery and postal markets.
He can be reached at alan.robinson@directcomgroup.com